HRSA’s Order for 340B is a Win for Rural Accountable Care

SPONSORED CONTENT by Dr. LeeAnn Scheer, Caravan Health

Safety net facilities are celebrating the May 17 HRSA letters to six drug manufacturers affirming they must provide drugs to covered entities through their contract pharmacies at the 340B ceiling price. This decision will help these facilities, many of them rural, stretch this federal program to improve their financial sustainability and continue to provide excellent care in their communities. This is especially great news for rural facilities that participate in an accountable care organization (ACO).

In an ACO, a group of health providers band together to take responsibility for the costs and quality of care delivered to a defined population of patients. ACOs can include physician practices, hospitals, and health clinics, including covered entities such as critical access hospitals and federally qualified health centers. The ACO can earn a share of savings if it reduces the costs of care below a designated threshold. Creating these savings while maintaining quality of care for patients requires commitment from every level of the organization to build dependable streams of revenue while reducing unnecessary costs.

ACOs can include physician practices, hospitals, and health clinics, including covered entities such as critical access hospitals and federally qualified health centers

Some rural providers are skeptical about transitioning to  value-based payment, and the wariness is understandable. Over the past 10 years, more than 100 rural hospitals have closed. Rural communities are managing an aging, sicker population who must travel long distances to receive care, and a stubborn shortage of skilled providers. This was all true pre-pandemic, before COVID-19 put even more stress on rural health services and finances.

Value-based payment is very promising for the future of rural health. There is excellent evidence that rural providers can thrive in accountable care organizations with the right support. The resounding success of the ACO Investment Model shows that rural practices can set themselves up for ACO success with loans to cover upfront costs that are repaid through shared savings. A strong 340B program is a pillar of that success and the HRSA decision indicates a roadmap forward.  

340B discounts represent a significant source of financial stability for these rural entities. Through their contract pharmacy networks, covered entities can receive an estimated 25-50% discount on prescription medications. These entities are already facing the threat of Medicare cuts for 340B-eligible drugs reimbursed by Part B. The least drug manufacturers can do is meet their legal obligation of providing discounts on eligible prescriptions filled at pharmacies located outside the walls of the covered entity.

There is excellent evidence that rural providers can thrive in accountable care organizations with the right support.

Rural covered entities rely on being able to grow their contract pharmacy networks. Not only is this a source of cost savings for the covered entity, but this also ensures greater prescription drug access for rural patients. Patient health and medication compliance depends on convenient access to prescription drugs. For rural patients, many of whom have multiple chronic conditions, access to a contract pharmacy means they can pick up prescriptions where they shop for groceries or receive their prescriptions through the mail. This saves a trip to the clinic that can average nearly 20 miles just to get a prescription refilled.

Beyond simply creating a more dependable source of savings for covered entities, the HRSA letter reaffirms that safety net facilities, including many rural hospitals and clinics, can use 340B to make the most of joining an accountable care organization. Since an ACO bears responsibility for total cost of care, ACOs have access to a wide view of patient utilization and cost information. This greater visibility into prescribing information allows ACO participants to optimize their 340B programs. Rural providers can be sure that prescriptions written for their patients are not falling through the cracks, even those prescriptions written by clinicians outside the safety net facility.

When you combine the promise of value-based payment in rural communities and a strong 340B program, the future is bright for rural value-based payment. This good news from HRSA clears the way for safety net facilities to stay afloat as COVID-19 effects continue to ripple through our health care system.

Author Dr. LeeAnn Scheer, Chief Pharmacy Officer, Caravan Health, can be reached at lscheer@caravanhealth.com.

Dr. LeeAnn Scheer,

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